There are certain advanced social security income strategies available for married couples that can help to maximize income in retirement. It’s a different story for single people who have fewer opportunities to use some of these more advanced strategies. But there’s a strategy called “filing and suspending” that may work for you, no matter your marital status.
File & Suspend: Not just for married couples
This strategy is sometimes used by married couples because it allows for one partner to defer taking benefits and gain credits on their benefit for doing so. In the meantime, the other partner receives a spousal benefit. But if you’re single, there is no “spousal benefit” so the rationale for utilizing such a strategy is different. A single person might use this strategy by filing for benefits retroactively.
Retroactive Benefit Payment Limits
Under the “normal” social security rules, those who are full retirement age can only file to receive back payment benefits retroactively for up to 6 months. For example, let’s say George plans to wait until age 70 to collect benefits so he doesn’t go through the process of filing and suspending those benefits. Then, at age 67, George changes his mind and wants to file and suspend. He is only entitled to receive a lump sum payment for the last 6 months of benefits that he could have received. If George had filed and suspended benefits at his full retirement age and later changed his mind, he would be entitled to receive all of the benefits he would have been entitled to receive going back all the way to the date that he originally filed and suspended.
When File & Suspend Can Pay Off
Now you might be asking, “Why does any of this matter if my game plan is to wait until age 70 to collect benefits?” Your skepticism is justified because in most cases it will make no difference. However, in some cases, your health might change from the time you are 66 to 70. Then, it would make a lot of sense to go back to social security and ask for a lump sum payment for benefits you would have received from 66 to 70. If you filed and suspended, you are entitled to get all of those benefits. If you didn’t file and suspend than you are only entitled to receive 6 months’ worth of back payments.
The rules surrounding social security are vast and very complex. As with any complicated financial decision, it’s often best to seek the help of a qualified financial professional to help navigate the waters.
Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.
The information contained in this report has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making a n investment decision and does not constitute a recommendation. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. Examples are for illustrative purposes only. C14-028511